Bianca Barath
Fuel prices are always fluctuating. They fluctuate between days of the same week. And sometimes, the fluctuation is very significant. Shipping carriers are very careful, planning their charges and their fuel surcharges, factoring the fuel price fluctuations. This is because fuel is one of their major cost components. While their other costs are predictable and almost always constant, fuel prices aren’t.
Vacillating fuel surcharges
When oil prices fall, the less expensive it is to run trucks. Shipping carriers have a cost advantage here. When there is a dramatic decrease in fuel costs, carriers spend significantly less on their last mile of the delivery schedule. And this reflects in their bottom line. They are, during this period, willing to give you better rates, irrespective of volumes. In case of staggering fuel prices, the same carrier will slap a significant fuel surcharge on your shipping bills. A fluctuation in a given period can be confusing times and your shipping carrier will be interested in checking your volumes before giving you a quote.
Buffer in your contract
Carriers who work on long term contracts with shippers benefit very well from a drop in fuel prices. The long term contract is based on higher fuel rates. The fuel surcharges do not factor fuel prices, lower during the fluctuation of the market. Does fluctuating fuel surcharges affect your shipping cost? When fuel prices hit rock bottom, the carrier makes a killing. So, time your long term contracts for this time. You will get better long term benefits. If monitoring fuel prices is not your thing, make sure to add a threshold for either a drop or spike in fuel prices to avoid revisiting your contract.
Multiple Stock Keeping Units
To trim the impact of fluctuating fuel prices, businesses can take a stock of their customer base and operate out of multiple distribution center to avoid long distance shipping of packages. With shrinking delivery cycles, maintaining multiple SKUs aids in superior customer service.
Fuel cost vs Carrier charges
Fuel cost is only a small portion of the charge quoted by the shipping carrier. The other charges include the driver time, cost of vehicle, sorting and other charges. Even though conventionally shipping carriers are not transparent about their operation, it is important to understand what exactly you are paying for. It is not uncommon for carriers to add incorrect surcharges to your invoice.
Intelligent Packaging
To combat plummeting fuel prices, increasingly shipping carriers are adding charges to large bulky shipments that occupy more space in the truck. So it make sense for retailers to rethink their packaging strategy and come up with more efficient packaging methods in order to lessen the impact of additional charges levied by their shipping carrier.
If you like this blog, check out our other related blogs: